Tower Australia Group (TAL)

Uncertainty surrounding the banking regulator’s new capital proposals has wiped some of the shine off
Tower Australia Group
’s 88 per cent rise in net profit for the year ending September 30.

Goldman Sachs said it would have considered upgrading its recommendation to “buy", were it not for the Australian Prudential Regulation Authority’s new capital standards.

“We have become a lot more comfortable that APRA’s new standards should not end up destroying the valuation equation," analyst Ryan Fisher wrote to clients.

“However, until the new standards are actually finalised ... we simply cannot be 100 per cent sure."

The broker said an unfavourable outcome could constrain the company’s ability to fund all its growth internally. It has a target price of $3.15 and a “hold" recommendation on the stock.

Credit Suisse was likewise put off by APRA’s capital rules. The broker has decreased its valuation to $3.20, applying a 10 per cent discount to allow for “current uncertainty surrounding APRA capital developments and the impact it may have on a stand-alone life insurer".